1) If long term GDP growth is 2.5% annually, inflation is 3% per year, the dividend yield is 4%, and short term interest rates are 6%, then

	a.	inflation-adjusted capital gains must be 0.5% per year
	b.	the equity risk premium must be 3.5%
	c.	dividends must be growing by 5% per year
	d.	dividends are not growing and share prices are showing capital losses of 1% per year
	e.	any broad-based stock market index (such as the S&P 500) will be rising at a rate of 9.5% per year

2) Central banks

	a.	influence the money market but not the bond market
	b.	have influence over short term interest rates but no influence over long term interest rates
	c.	can influence bond yields but not bond prices
	d.	can raise long term yields, if they create credible expectations of rising short term rates
	e.	can reduce yields on long term bonds by issuing new debt